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I have been trying to come to terms with the idea of very deep OTM and 60-90DTE compared to the approach the I currently take (OTM and 30DTE) and have posted previously.

Ron and Kevin, would you be kind enough to comment on the following proposed CL Nov strangle, where the strikes are assigned, the premium, fees and the margin. My request to is try and further understand this approach. If possible would you answer the following questions from your experience.

1. It is my perception which (could be wrong and please correct me) that with such a large number of contracts and such a small premium that the value of the trade moves around significantly. Could you provide you view of how the value of a trade and margin over such a long DTE fluctuates?

2. Is the idea of such a Long DTE that it is more important to be deep OTM than to maximise time decay?

As you can see the posts in the group have sent me into a spin as I evaluate and question my adopted approach. This is a good opportunity for me to learn more about the key features of writing in terms of DTE and DOTM.

Thanks in advance.

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I have been trying to come to terms with the idea of very deep OTM and 60-90DTE compared to the approach the I currently take (OTM and 30DTE) and have posted previously.

Ron and Kevin, would you be kind enough to comment on the following proposed CL Nov strangle, where the strikes are assigned, the premium, fees and the margin. My request to is try and further understand this approach. If possible would you answer the following questions from your experience.

1. It is my perception which (could be wrong and please correct me) that with such a large number of contracts and such a small premium that the value of the trade moves around significantly. Could you provide you view of how the value of a trade and margin over such a long DTE fluctuates?

See attached image. Those are 150 calls. Aug Sep & Oct. Because the strike is so far OTM and the delta is so low, the premium does not move significantly unless futures move significantly.

2. Is the idea of such a Long DTE that it is more important to be deep OTM than to maximise time decay?

Time decay happens at a higher DTE the further OTM the option is. So we are still maximizing time decay but being less risky because we are so far OTM.

As you can see the posts in the group have sent me into a spin as I evaluate and question my adopted approach. This is a good opportunity for me to learn more about the key features of writing in terms of DTE and DOTM.

Thanks in advance.

The ROI is very good on that strangle. I get 8.5% monthly ROI if you ride it to expiration. (Note I'm using $198 each for margin. That is the correct OX number. 20% over SPAN. Their system does not calculate spread option margin correctly.)

Tip. Option premium erosion happens quicker on CL puts vs calls. So I usually leg into the strangle by putting the puts on 1st and then later the calls.

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The ROI is very good on that strangle. I get 8.5% monthly ROI if you ride it to expiration. (Note I'm using $198 each for margin. That is the correct OX number. 20% over SPAN. Their system does not calculate spread option margin correctly.)

Tip. Option premium erosion happens quicker on CL puts vs calls. So I usually leg into the strangle by putting the puts on 1st and then later the calls.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

What would happen if the futures moved violently? Wouldn't this drive premium up on both sides of the trade?

Also how would you handle margin buffer amounts on a strangle such as this?

The ROI is very good on that strangle. I get 8.5% monthly ROI if you ride it to expiration. (Note I'm using $198 each for margin. That is the correct OX number. 20% over SPAN. Their system does not calculate spread option margin correctly.)

Tip. Option premium erosion happens quicker on CL puts vs calls. So I usually leg into the strangle by putting the puts on 1st and then later the calls.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Regarding legging in - if you were to leg in now on the puts how long would you wait to get the calls on? Would you wait for a price reaction or is it strictly based on time?

This post follows a previous post. This chart compares XSP and USO 2013 to a 3 year seasonal average (2010 to 2012). I wanted to look at the index against USO following Ron's obserservation that the previously posted USO chart looked like the seasonality of the market. Well Ron was right. They look pretty much the same. I have also looked at the 15 and 30yr charts for CL from Moore which look quite different to the last 3 years. The purpose of this work is to try and better understand seasonality and how it might affect my approach to writing strangles on CL. All comments observations and or corrections are welcomed. (Please note that the chart is normalised so that the proptional moves of either the XSP or USO are based on a common datum.)

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That may seem counter-intuitive, but that's exactly what Cramer is hearing from Carley Garner, the co-founder of DeCarley Trading and author of A Trader's First Book on Commodities.

She tells Cramer that historical patterns would suggest a strike should generate some watershed selling.

Looking back two years, when the US went into Libya, the price of oil domestically dropped by 10% almost immediately. And after America invaded Iraq a decade ago, oil futures tumbled 15%.

That's largely because oil prices tend to rally in anticipation of an attack, but after it happens it becomes a 'sell the news' event.

Garner says technical patterns in the charts of crude oil suggest that history is about to repeat itself, as the US threatens to strike Syria.

First, Garner says the stochastic oscillator has been in overbought territory since July, and every time the oscillator has reached overbought levels in the last couple of years and then pulled back, the declines have been significant.

Also, looking at the weekly chart, Garner points out that the price of crude is now consolidating in a violent but relatively narrow trading range. That too is bearish.

And she adds that the calendar is bearish for oil. Seasonally oil has a strong tendency to top out in early to mid-September.

And on top of all that, speculators currently hold record net long positions in oil. That too suggests selling is imminent.

Due to these and other patterns Garner suggests selling into strength.

Looking at how sharp the decline may be, Garner says there's every reason for crude to decline down to $96 and adds if that level doesn't hold, the next level of support should be $90.